WhiteWave, Post Are Natural Stars Amid Food M&A

WhiteWave Foods, the natural and organic-focused products maker spun off from Dean Foods two years ago, in May found itself suddenly free. Tax free, at least. The spinoff could now be acquired without incurring a major tax burden back onto Dean Foods (NYSE:DF). The new status made it a free agent in a rapidly consolidating industry, where legacy packaged-food heavyweights aim to cut costs and chase shifting consumer tastes.

And while analysts say the “elevated valuation” of the Earthbound Farms and Horizon Organic parent could be keeping wooers at bay, many also see WhiteWave Foods (NYSE:WWAV), with its on-trend natural and organic offerings, as the belle of the packaged-foods ball.

“While no brave suitor has yet come forth, it still seems possible that WhiteWave could become a take-out target,” Sanford C. Bernstein analyst Alexia Howard wrote on Sept. 11.

WhiteWave's Silk-brand coconut milk is among the rising number of healthier alternatives that are in increasing demand and are becoming hot...

WhiteWave’s Silk-brand coconut milk is among the rising number of healthier alternatives that are in increasing demand and are becoming hot… View Enlarged Image

A slew of household names have lately been involved in some kind of acquisitive behavior. Kraft Foods and Heinz came together in a high-profile merger earlier this year, building one of the largest food and beverage companies in the world on a foundation of cheese singles and ketchup. Global investment firm 3G Capital backed the deal, alongside Warren Buffett’s Berkshire Hathaway (NYSE:BRKA), which acquired Heinz in 2013. (3G currently has set its sights on other ready-to-consume goods, attempting to orchestrate a beer merger between Anheuser-Busch InBev (NYSE:BUD) and SABMiller.)

Activist investors have been nudging other packaged food makers to consolidate.

In July, Reuters reported that ConAgra Foods had engaged in discussions with Treehouse Foods (NYSE:THS) and Post Holdings (NYSE:POST) about potentially selling Ralcorp, its private-label business. Hedge fund Jana Partners has a $ 1.2 billion stake in the owner of the Chef Boyardee and Slim Jim brands.

Pershing Square’s Bill Ackman reportedly told CNBC that Mondelez International (NASDAQ:MDLZ) — home to the Oreo and Triscuit names and in which he has a $ 5.5 billion, 7.5% stake — could be a potential takeover candidate.

Mondelez recently said that it is planning for online sales to reach $ 1 billion in 2020, up from its current $ 100 million. It also aims for more of its revenue growth to come from more healthful fare, according to Reuters. Kraft and Mondelez split up in 2012, but they could conceivably be reunited.

“If Mondelez fails to live up to the expectations of investors, or leaves money on the table with respect to the potential for further cost-cutting and margin improvement, the company runs the risk of becoming a target for Kraft Heinz (NASDAQ:KHC),” noted Howard, calling Illinois-based Mondelez a “near-perfect addition” to Kraft Heinz’s portfolio.


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